Carbon Taxation as a Tool for Sustainable Development in Africa ...

Carbon Taxation as a Tool for Sustainable Development in Africa: Evaluation of Potentials, Paradoxes and Prospects Alexander Ezenagu* Abstract Calls for the introduction of a carbon tax into the tax lexicon in African countries may not have come any sooner. South Africa for example has developed a robust proposal aimed at introducing a carbon tax system by 2016. The aim is to reduce greenhouse gas (GHG) emissions from key sectors such as mining, transportation and agriculture and to achieve sustainable development. Following South Africa’s perceived progress in its carbon taxation efforts, there have also been increased calls for Nigeria and other African countries to reform extant taxation laws to introduce a carbon tax system for key polluters in the extractive sector. This paper evaluates the utility, desirability and potentials of achieving sustainable development in Africa through carbon taxation. Following a discussion of the motivations for considering a carbon tax system, we evaluate potential impacts of a carbon tax system on African economies, particularly on poor and vulnerable communities who despite contributing less to GHG emissions may bear disproportionate burden of combating it. We then evaluate the potential legal and logistical barriers that a carbon taxation system might face and propose legal frameworks for addressing these barriers. Introduction Africa’s economy, today, is threatened by two factors: the crash in commodity pricing; and the effects of climate change on the environment and investment opportunities in the continent. The introduction of carbon tax may proffer solutions to some of the present problems faced by the continent. For one, the decline in prices of commodities and the loss of revenue accruing to African countries, emphasize the need for African governments to seek other ways of revenue generation. Secondly, the planned diversification of the African economy, coupled with the fact that Africa is largely an extractive industry economy, places it in a viable position to maximize returns from the exploration and exploitation of its natural resources. Third, and in no way less important, is the need to protect the environment and address the global challenges of global warming, in light of the commitment the continent has made to international bodies championing the reduction of gas emissions. At the recently concluded COP21 conference held in Paris (Paris Agreement), governments of states resolved to hold the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the * Alexander Ezenagu is a doctoral researcher in International Tax Law at McGill University, Canada

and holds a Master of Law degree (LL.M) from the University of Cambridge, UK. He writes on the intersections between taxation, development and cooperation among nations.

Electronic copy available at: http://ssrn.com/abstract=2748040

temperature increase to 1.5 degree Celsius above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change. This paper considers how carbon taxes can be used by African governments to achieve diverse policy goals. 1. Meaning, nature and scope of carbon taxation Simply put, carbon tax is tax paid on the emission of carbon (CO2) into the atmosphere. It refers to a form of explicit carbon pricing; a tax directly linked to the level of carbon dioxide (CO2) emissions, often expressed as a value per tonne CO2 equivalent (per tCO2e)1. The David Suzuki Foundation defines carbon tax as, “ a fee placed on greenhouse gas pollution mainly from burning fossil fuels. This can be done by placing a surcharge on carbon-based fuels and other sources of pollution such as industrial processes”2. A carbon tax puts a price on the real costs of greenhouse gas emissions on the economy, the environment and on the pockets of governments. Kaufman3 opines that the fuel specific charges that would be imposed by a carbon tax are a popular policy option because many believe that a carbon tax will reduce emissions of carbon dioxide in an economically efficient manner. That is, a carbon tax will reduce the use of fossil fuels by spurring technical change and inducing the substitution of capital, labour and nonenergy materials. As at December 2015, 15 national and subnational jurisdictions have introduced a direct carbon tax. These are: British Columbia, Canada; Chile; Costa Rica; Denmark; Finland; France; France; Iceland; Ireland; Japan; Mexico; Norway; South Africa; Sweden; Switzerland; and the United Kingdom. South Africa’s carbon tax covers greenhouse gas emissions arising from energy use (fuel combustion and gasification) and non-energy industrial processes. It is important to note, that of all 54 African countries, only South Africa has a direct carbon tax regime, though, this statement does not deny that other African regimes have put in place different approaches to combatting environmental pollution, such as the gas flaring regime in Nigeria. Carbon tax posits a unique way of arresting environmental pollution through revenue generation and behavioral change. We explore this further below. 1 Based on “Climate and carbon-Aligning prices and policies,” OECD Environment Policy Paper, October 2013 n°01”. 2 Accessible at http://www.davidsuzuki.org/issues/climate-change/science/climatesolutions/carbon-tax-or-cap-and-trade/ 3 Kaufmann, Robert K.. 1991. “Limits on the Economic Effectiveness of a Carbon Tax”. The Energy Journal 12 (4). International Association for Energy Economics: 139–44. http://www.jstor.org/stable/41322446.


2. Approaches to carbon emissions The economic candidates to carbon emissions are a carbon tax and tradable carbon emission permits4 (cap and trade system). In a cap and trade system, the government sets emission limits for emission entities, who must abide by the set limits. Emission entities that exceed their emission limits may buy from those, under-utilizing their emission quotas. Government reduces the emission caps each year to set a new pollution target and allocate new emission limits to industries. This way, companies are forced or incentivized to seek other ways to meet their energy needs, thereby embracing the use of green technology. Companies may also explore the option of buying allowances from other emission entities that have not surpassed their limits, which may be an increase in its cost of production. Cap and trade allows emission treaties to reduce emissions based on the cost of reductions, as opposed to requiring all industries to meet the same emission requirements, regardless of cost5. Anderson and Sullivan opine that a cap and trade system: can help energy intensive industries remain competitive with companies in regions that have no emission caps; eliminates windfall profits, provides money for clean energy development, and helps low-income ratepayers; can be distributed only to major greenhouse gas emitters and suppliers of fossil fuel, simplifying the system; guarantees that specific emissions reduction targets will be met, given that the caps shrink over time; brings in revenues that can be used to ease the burden on those with lower incomes; and assures price stability through the banking, auctioning and safety valves put in place. They highlight the disadvantages of a cap and trade system. Some of the disadvantages of a cap and trade system are: large fluctuations and unpredictability in allowance prices to make investment decisions difficult; complexity of a trading regime could foster delay and be difficult to enforce; firms operating under cap and trade are at a competitive disadvantage; free allocation of allowances provides windfall profits for polluters; a comprehensive programme must encompass many sectors, creating complications for trading and enforcement; and increased energy prices will burden low-income families6. 4 Pearce, David. 1991. “The Role of Carbon Taxes in Adjusting to Global Warming”. The Economic Journal 101 (407). [Royal Economic Society, Wiley]: 938–48. doi:10.2307/2233865. 5 See Glen Andersen & David Sullivan, Reducing Greenhouse Gas Emissions: Carbon Cap and Trade and the Carbon Tax, NAT’L CONFERENCE OF ST. LEGISLATURES (July 2009), http://www.ncsl.org/documents/environ/Captrade.pdf; The EU Emissions Trading System (EU ETS), EUR. COMM’N, http://ec.europa.eu/clima/policies/ets/index_en.htm (last visited Mar. 4, 2014). 6 supra


We discuss below the pros and cons of introducing carbon tax. 3. Pros and cons of introducing carbon tax At the heart of every nation, is the provision of social amenities and infrastructure for its inhabitants. These responsibilities fall on the government of the nation, who in turn share the burden among its inhabitants through the means of taxation. The basis for this relationship has been defined by scholars as deriving from a “social contract” or “economic allegiance”. Imposition of tax is met with the strongest opposition by taxpayers who believe that the government misappropriates tax payers money rather than spend on infrastructure. Thus, we believe that selling carbon tax to tax payers will be a difficult task for any African government to achieve. Having laid the obvious opposition to the imposition of carbon tax on tax payers in African countries, we proceed to discuss the pros and cons of carbon tax in reducing carbon emissions. Carbon tax leads to ‘double dividend’. This implies the environmental benefit linked to the incentive effects of environmental taxes, given that, emission entities will ultimately seek cleaner energy supplies and reduce the combustion of fossil fuel. The second dividend lies in benefits in terms of employment or business generated by the revenue-neutral goal of carbon tax. In countries where carbon tax has been introduced, governments have either reduced taxes in other areas, devised a pay back scheme or expended the revenue from carbon tax on infrastructural reliefs such as subsidized transportation, health care, clean parks and water especially for the poor. Thus, unlike cap and trade, which focus on the industries and the carbon market, carbon tax works for the greater good of the society. Secondly, carbon taxes have a low compliance cost. Pearce argues that this low compliance cost results from the fact that a tax common to all polluters will give rise to varying rates of abatement determined by individual marginal costs of pollution abatement. High marginal cost polluters will therefore pay the tax rather than abate, concentrating abatement measures in low polluters. Attached to this compliance cost, is the reduced cost of enforcement of a carbon tax. Assuming a tax structure already exists in the country, a carbon tax can be applied as the VAT system, in certain industries, and as a licensing regime in other industries or emission entities. Thus, existing tax and or licensing regimes may be immediately employed to implement carbon tax in most African countries. We shall explore further below, the implementation of carbon tax. Thirdly, introduction of carbon tax leads to innovation in green technology. At the moment, countries are moving from fossil-fuel energy to greener technology such as solar energy, wind energy and innovation in

this industry is fast expanding. Electric cars are being produced and are expected to replace fossil-fuel powered vehicles in the nearest future. While admitting that African countries are behind the developed countries, in terms of innovation and green technology, one expects that African countries will be left with no other option but to adopt this innovation in energy production. The Paris Agreement said as much. Thus, it is expected that the introduction of carbon tax will cause emission entities to seek cleaner ways of generating and using energy, and this search for clean energy will open the market for green technology in Africa. Opponents of carbon tax have argued that a carbon tax does not guarantee decreased carbon emissions7. They claim, that unlike a cap and trade system, which sets emission limits, a carbon tax focuses on revenue generation. While there is some truth to the claim, one must appreciate that taxpayers are not receptive to the idea of paying more taxes to the government. Thus, this tax apathy will lead to taxpayers seeking ways of not losing money to the government and one of such ways will be to embrace green technology. This is particularly true for African countries, where citizens will reduce fossil- fuel combustion if there is a high cost attached to the use of fossil fuels. Secondly, as earlier stated, taxes are politically unfavorable and taxpayers apathy is prevalent. Putting more money in the hands of the governments of African countries, suspected of corruption and misappropriation may be viewed as an ill-thought idea. Also, there are fears that a carbon tax may distort the economy, though, evidence from Scandinavian countries, except Sweden, shows otherwise. It is apt to state that the focus should not be on the revenue-generation attribute of a carbon tax but to the impact a carbon tax possesses on the environment, a carbon tax possesses in terms of behavioral change and clean technology. Other disadvantages of a carbon tax include: inadequate information- except for South Africa, which claims to have data on the quantity of carbon emission with a relatively high level of accuracy for different processes and sectors- most African countries do not have data on carbon emissions, emission entities and appropriate carbon tax rate; management of the system- given the dearth of administrative capacities of tax administrators in African countries; presence of other environmental policy measures such as the Associated Gas Reinjection Act of 1979, enacted to curb the menace of gas flaring in Nigeria. 4. Economic returns of carbon tax

7 see Anderson and Sullivan’s paper cited above.

Factors that influence the economic returns of carbon tax in any country include, the pricing of the carbon, the carbon tax base and the administration of the carbon tax regime. For example, British Columbia has set a price of CAD8 30 per tCO2e9, Chile has a pricing of USD5 per tCO2e, Sweden at a rate of USD168 per tCO2e and South Africa at a price of R120 per tCO2e, with an expected yearly increase of 10% until the end of 201910. An optimal tax rate is one that reflects the cost of the consequences of the activities of the polluter for the society as a whole. This approach known as the cost-benefit analysis allows the marginal benefit that society acquires from the reduction of damage to be compared with marginal cost to society of cleaning up the pollution. Another approach is the cost-effectiveness analysis, which involves choosing the amount of tax such that it will achieve a previously set emissions reduction goal11. In regard to the tax base, the broader the carbon tax base, the higher the revenues generated by the imposition of carbon tax on emission entities. However, countries are known to exempt particular industries from the payment of carbon tax, thus, narrowing the carbon tax base. For instance, Denmark does not tax fuels used for electricity production, Ireland excludes most emissions from farming, and Mexico exempts natural gas from carbon tax. These exemptions are policy considerations aimed at encouraging industrial development. In our considered view, an optimal tax base for revenue generation will be one that has a Pigouvian effect. A Pigouvian tax, named after Arthur Cecil Pigou, is a tax levied on any market activity that generates negative externalities, in this instance, a tax levied on all emission entities generating negative externalities. Thus, from households using fossil fuels to cook, for electricity, to the car owner, whose automobile causes damage to the environment, to the cigarette smoker, to the factory owner, or company operating on fossil fuels, all these emission entities must be captured within the tax base. Setting an adequately captured rate will balance off the cost of emission to the emission entities, with the biggest polluters paying the highest cost for emissions. African countries, being largely extractive industries, will be positioned to generate high revenue from the exploration and production of their natural resources. Carbon taxes from the oil and mining industries, 8 Canadian dollar 9 “Ton of carbon emitted” 10 World Bank data accessible at http://www.worldbank.org/content/dam/Worldbank/document/Climate/backgrou nd-note_carbon-tax.pdf 11 for more information on carbon pricing, see: Elbeze, J., and De Perthuis, C., 2011, Twenty years of carbon taxation in Europe: some lessons learned , Les Cahiers de la Chaire Economie du Climat, Information and debates Series

if adequately implemented, can generate significant revenue to the governments of these countries. Thirdly, efficient implementation of carbon tax is at the heart of realization of any meaningful revenue contribution to the economy of any Africa country. Sadly, this is one area African countries are reputed to have failed. Most African countries are yet to capture the informal sector into the tax base and if carbon tax is to be successful, efficiency must be ensured. Having stated the factors to economic returns from carbon tax, how successful in terms of economic returns has the introduction of carbon tax been to countries that have effectively implemented it? Ireland’s carbon tax generates about 400million euros annually; British Columbia generated CAD$6.1 billion between 2008 and 201512; Finland revenue of USD750 million; Netherlands- annual revenue of USD4.819 billion; Sweden- annual revenue of USD3.665 billion; United Kingdom- annual revenue of USD905 million; Denmark- annual revenue of USD905 million13. While, admittedly, appreciable revenue may be realizable from carbon tax for revenue-starved African countries, the reduction in carbon emission remains the core purpose for introducing carbon tax in any country. For instance, Murray and Rivers report that British Columbia experiences a 515% reduction in carbon emission since the introduction of carbon tax14; Sweden’s total greenhouse gas emissions fell 16 percent; in Norway, carbon tax effect on emissions is about 1.5% to 2.3%15 5. Practical and legal barriers to implementing carbon tax Though Africa contributes little to the global carbon emissions, it is not spared from the effects of global warming on the environment. Also, Africa’s relative negligible contribution to the global carbon emissions can be blamed on the absence of infrastructure and manufacturing industries. As Africa opens the continent to foreign direct investment and infrastructural facilities are put in to place, the pollution from the development will have to be curtailed early on. Carbon tax provides a genuine tool for encouraging behavioral change and use of green 12 B. Murray and N. Rivers. 2015. “British Columbia’s Revenue- Neutral Carbon Tax: A Review of the Latest ‘Grand Experiment’ in Environmental Policy.” NI WP 15-04. Durham, NC: Duke University. http://nicholasinstitute.duke.edu/publications 13 Sumner, Jenny, Lori Bird, and Hillary Smith. 2009 “Carbon Taxes: A Review of Experience and Policy Design Considerations.” National Renewable Energy Laboratory Technical Report NREL/TP-6A2-47312 14 supra 15 Bruvoll, Annegrete and Bodil Merethe Larsen (2004), “Greenhouse gas emissions in Norway: Do carbon taxes work? Energy Policy 32 (2004)

technology. Here, we discuss some of the practical and legal barriers to implementing carbon tax. Ironically, one of the barriers to the implementation of carbon tax is the dearth of infrastructural facilities. Most African countries are in darkness caused by power outages, industries are absent with moribund manufacturing companies, leading to Africa aptly described as an importing continent. The World Bank reports that the 48 countries of SubSaharan Africa (with a combined population of 800 million) generate roughly the same amount of power as Spain (with a population of 45 million).16Road networks have become death-traps, and have economic implications, considering that farmers in the rural areas are unable to transport their goods to cities where they are needed, thus, discouraging agriculture. The implication for carbon tax is simple- absence of carbon emission means absence of carbon tax. Experts have estimated that Africa will need to invest nearly USD93 billion per year over the next decade to bridge the deficit of infrastructural gap. The continent has been identified as the next economic hub, with impressive GDP in the past decade. Investors are seeking to come into Africa to exploit its rich reserves in oil, gold, copper, and as the investors achieve this, the environmental pollution is expected to increase. Thus, as Africa opens for investment and the manufacturing industry springs, carbon tax becomes a revenue-generating tool for the government. Experts have warned that Africa could account for half of the world’s particle pollution by 2030 due to booming urban population and growth in mining, oil and biofuel industries, thus making it important to start thinking ahead. Most Sub-Saharan African countries tax to GDP ratio falls below 15% compared to their OECD and other European countries counterparts, averaging 35%. This low tax to GDP ratio is caused by inefficient tax administration and lack of transparency in most African countries. The tax base in most African countries is narrow as the informal sector is hardly captured and emphasis placed on natural-resource sectors 17 . For any meaningful returns from carbon tax, the carbon tax base must be broadened to capture all emission entities, save for those expressly exempted by legislation or policy. The tax base must capture emissions from car exhaust, wood and garbage burning, use of fuel stoves, use of diesel electricity generators and petrochemical plants, gas flaring, oil 16 accessible at http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/AFRICAEXT/0,,content MDK:21951811~pagePK:146736~p 17 see Bird, Richard M., Tax Challenges Facing Developing Countries (March 2008). Institute for International Business Working Paper No. 9. Available at SSRN: http://ssrn.com/abstract=1114084 or http://dx.doi.org/10.2139/ssrn.1114084

spillages, refining activities, etc. Efficient and capable tax authorities with in-depth training on mobilization and collection of domestic revenue are essential to provide African governments with predictable revenue, thereby reducing the reliance on natural resources such as oil, copper and gold, and also dependence on development aids. A domestic revenue source will go a long way in budget planning and implementation, and will reduce reliance on foreign currencies, thus protecting the local currencies. The effects of over-reliance on foreign currencies on the economy are adverse as currently being experienced by most African countries, with the devaluation of their local currencies. Also, tax authorities must possess data of emission entities, fuel consumption and emissions inventories. Scientific ways of measuring carbon emissions must be put in place and tax authorities trained to adequately capture the cost of such emissions. A third barrier to imposition of carbon tax on taxpayers in African countries is the prevailing poverty in the land. In the December 2015 HDI report, of the 44 low HDI countries, 37 of them are African countries18. Poverty is a common phenomenon in African countries in its many forms, power is a luxury, roads are death-traps, health services are absent or not fit for purpose and life expectancy is at its lowest ebb. Per capital ratio is low and spending power is below USD 1 per day for most citizens in SubSahara Africa. Hence, the biggest challenge imposition of carbon tax will experience will be that of enforcement, especially for low-income earning emission entities. Imposing additional tax burden on taxpayers, already over-burdened is bound to be unpopular amongst all stakeholders. Another barrier to introduction of carbon tax in African countries is the absence of clean alternatives to fossil fuels. Alternatives such as biofuels, solar energy, water-driven hydro projects, are yet to be fully developed and utilized in commercial quantities. Until green technology is developed to replace fossil fuels, the goal of reduction of carbon emissions will be impossible to achieve and imposition of carbon tax will have no significant influence on reduction of carbon emissions, which is the ultimate goal of carbon tax. Furthermore, it is important to note that attempts to replace fossil fuels will be met with strong opposition from African countries that are large exporters such as Angola, Nigeria, notwithstanding the global dictates, as may be gleaned from the Paris Agreement and other global discussions of replacing fossil fuels in order to save the environment. For instance, Africa accounts for about 30% of all global mineral reserves, proven oil reserves constitute 8% of the world’s reserves and natural gas about 7%. Natural resource wealth accounts for an average of 70% of total African exports and about 28% of GDP. It is quite obvious that any policy or discourse which affect or may affect the economy of these natural-resource rich countries 18 report accessible at http://hdr.undp.org/en/composite/HDI

will be strongly opposed. Thus, carbon tax and its expected consequences may not sit well with most African governments. 6. Administration of carbon tax An important feature of carbon tax discourse is the design and administration of the tax. Determining who pays the tax is probably a better consideration than who bears the brunt. Granted, the brunt will be borne by the end-consumers. However, the question of whether the tax will be paid upstream, downstream or mid-stream, becomes a policy decision of the governments. The Center for Climate and Energy Solutions recommends19 that, for administrative simplicity, carbon tax should be levied at the point where there are relatively few entities subject to the tax, though admitting that achieving this will depend on the fuel type. It further opines that wherever the tax is imposed, the price signal it creates will theoretically be passed backwards and forwards through the energy chain in the same way, and that the price signal should in principle bring about the same behavioral response and result in the same economic burden to firms and consumers. A downstream tax will have to capture millions of emission entities, thus making the administration expensive compared to an upstream tax, which captures few emission emitters and is relatively less expensive to administer. Thus, an effective design will be to adopt the VAT system, where manufacturers are taxed and the costs spread to end-consumers. So, for example, a company producing X amount of oil will pay the carbon tax on the expected emissions from the use of the oil by end-users and the carbon tax paid will be factored into the retail price of oil to end-users. Thus, liability to pay the tax rests with the upstream operator, while the operator ensures the tax costs are passed to their consumers. This design is efficient for African countries, given the capacities of tax authorities. This upstream tax may not capture all energy suppliers given the diversity of sources of energy in most African countries. This is where the licensing regime has an important part to play. Carbon tax can be built into the grant of licenses and renewal of same, and could be deployed to capture major emission entities like independent power plants or factories with independent power from fossil fuel combustion. The licensing regime could also be used to capture small emission entities such as vehicle operators not captured under the VAT system.

19 Center for Climate and Energy Solutions, “Options and Considerations for a Federal Carbon Tax,” www.c2es.org/publications/options-considerations-federalcarbon-tax.

7. Addressing these barriers The earth’s climate is changing and not in a good way, for most people. The years 2014 and 2015 have witnessed some of the hottest years on record. The change in climate has severe implications for the economy of the world and the lives of earth’s inhabitants. The effects of climate change cut across continents and travel far and wide. Africa cannot fold its hands and must join efforts of other countries to curtail global warming and climate change. Carbon tax provides one tool to use in the fight against global warming. We have highlighted some of the barriers to the introduction and imposition of carbon tax in Africa, and we proceed to highlight some of the steps that can be taken by all stakeholders to address these barriers. i. Education People have to be educated on the science of global warming and its effects on the climate. People have to be taught the reasons for climate change, the adverse effects of the change on lives and the economy. This education on climate change must be tailored to the recipients at each given time and at each geographical space, adapted to their environment and needs. The myths of climate change must be debunked and empirical evidence used to show the contributions of greenhouse emissions to climate change. This task must be undertaken by all African governments. ii.

iii.

Data The importance of data to addressing climate change cannot be over-emphasized. Data must be ascertainable on the amount of carbon emissions, the number of emission entities, upstream midstream and downstream operators, atmospheric particles, emissions limits, etc. African governments must invest on data collection and dissemination. Pricing for carbon The carbon tax rate must reflect an empirical valuation of the cost of carbon emissions to the environment, the economy and the lives of inhabitants, and must be set at a price that discourages fossil fuels combustions. The emissions limits or goal must be ascertained prior to setting a price and the price must reflect commitment to reduce carbon emissions. The carbon tax rate should rise and fall over time with the growth rate of the marginal damages from emissions. African governments should be dissuaded from seeing carbon tax as another revenue stream but must pursue revenue-

neutral carbon tax rate. This can be achieved by reducing other taxes or levies paid by inhabitants, and also by putting up palliatives. Also, tax bases should be broad enough to capture all emission entities or emissions behaviors, with few (if any) exceptions iv. Palliatives Palliatives must be put in place for two reasons: one, ensuring revenue-neutrality of carbon tax; and secondly, cushioning the effects of an additional tax burden on the poor. Such palliatives can be: a re-distribution of revenue got from carbon tax to the most vulnerable in the society or those directly impacted by environmental pollution; reduction of other taxes paid by taxpayers such as VAT, income taxes resulting in no effective net tax increase; massive investment in infrastructure such as clean parks, better transport system, free transport for taxpayers, education scholarships, planting of trees. Revenue-neutrality and palliatives are at the heart of imposition countries in countries and subnational jurisdictions, which impose carbon tax on their inhabitants such as British Columbia, Norway, Sweden, Finland, etc. and African countries can adopt these models. v. Efficient tax authority We have argued above that the success of carbon tax depends primarily on the tax authorities of the countries in question. The tax authorities must be equipped and trained to address the challenges of carbon tax. They must be capable to interact with other agencies such as environmental bodies, research institutes and other stakeholders in creating an effective carbon tax framework. Their activities and approaches must be scientific and transparent and they must command confidence from the taxpayers by acting in good faith at all times. 8. Conclusion Countries are using carbon taxes to address a wide range of issues including waste disposal, water pollution and air emissions. The

advantages of environmental effectiveness, economic efficiency, public revenue and carbon emissions reductions, attributable to carbon tax, have been recognized by developed countries and countries not yet imposing carbon tax are putting up structures to introduce carbon tax in their jurisdictions. South Africa leads the way for other African countries, and other African countries must rise up to the occasion and collectively fight climate change and its adverse effects on the economy and lives of all. This paper has set out to discuss the practicability of introducing carbon tax in Africa, drawing from the experiences of other countries leading the pack. The authors believe that though Africa is in a unique position, given its economic reliance and development of its citizens, it must however, recognize the need for sustainable development. Africa must think and plan ahead and recognize the need to secure the environment for future generations. Carbon tax offers “double dividend”- revenue generation and behavioral change, which ultimately reduces carbon emissions and hopefully, address climate change. It is our belief that this paper opens and encourages discussions in this area and African governments can rise up to the occasion.